Low Liquidity, Changing Investment Decisions On NGX May Continue Ahead Of Santa Claus Rally

Market Update for December 16

The oscillating trend on the Nigerian Exchange continued on Thursday as the key performance index wiped out the previous session gains on a low traded volume and negative breadth. As selling sentiment hits the insurance and industrial goods to dragged down the market, thereby making the market attractive for bargain hunters targeting dividend-paying stocks ahead of 2022 financial year-end. 

The market’s negative outing and mixed trend were driven by the changes in investment decisions of investors, as market players continue to interpret the recent economic data and happenings in the fixed income market in the midst of omicron and changing monetary policies in the mature markets of the world. We also notice a lower response to investment, as the Christmas season draws closer, with many investors likely wanting to spend more during this period than investing.

Technically, the NGX index’s action has entered another sideways ranging movement on a selling sentiment. Just as low transaction volume prevails to reveal low liquidity and absence of institutional players in the market, as momentum indicators for the day were down, while the ADX is reading 29.53, RSI at 47.92, and Money Flow Index flat at 28.02 points on the daily chart. The continuation of this trend depends largely on the interplay of market forces and inflow of funds into equity space as fixed income market yields remain unclear.

Thursday’s trading started slightly on the upside, before pulling back and fluctuated on selloffs among the blue-chip stocks that pushed the composite index to an intraday low of 42,262.85 basis points from its highs of 42,386.83bps and thereafter close below its opening point at 42,270.236bps.

Market technicals for the session were negative and mixed as volume traded was higher than the previous day’s in the midst of breadth favoring the bears on a negative sentiment as revealed by Investdata’s Sentiment Report showing 94% sell position and 6% buy volume. The total transaction volume index stood at 0.79 points, just as the impetus behind the day’s performance remained relatively weak, as the money Flow Index look down to read 28.02 points, from the previous day’s 33.98points, indicating that funds left the market.

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Index and Mkt Cap Movement

The benchmark index NGXASI, at the end of the day trading, shed 87.13 basis points, at 42,270.23bps after opening at 41,357.36bps, representing a 0.21% up, just as market capitalization fell by N45.46bn, closing at N22.06tr, from the opening value of N22.10tr, also representing 0.21% value loss.

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The session’s downturn was driven by selloffs and profit taking in stocks like Dangote Cement, Lafarge Africa, FBNH, UCap, Nascon, CAP, Livestock Feeds, Honeywell, and UPDC, among others, which impacted negatively on Year-To-Date gain, reducing it to 4.97%. Market capitalization stood at N1.12tr YTD, representing a 4.74% growth from the year’s opening value.

Mixed Sector Indices

Sectoral performance indexes were mixed, as NGX Industrial Goods and Insurance closed lower by 0.73% and 0.33% respectively, while NGX Oil/Gas led the advancers, after gaining 0.54%, followed by Banking and Consumer goods with 0.45% and 0.11% respectively.

Market breadth turned negative as losers outpaced gainers in the ratio of 20:15, while transactions in volume and value terms were up after stockbrokers traded 249.43m shares worth N3.57bn, compared to the previous day’s 229.46m units valued at N2.63bn. Volume was driven by trades in FBNH, Access Bank, ETI, UBA and Zenith Bank.

Royal Exchange Assurance and Charms were the best-performing stocks after gaining 5% and 4.76% respectively, closing at N0.63 and N0.22per share respectively on market forces. On the flip side, Livestock Feeds andUPDC lost 10% and 8.33% respectively, closingat N1.80 and N1.10 per share, purely on selloffs and profit taking.

Market Outlook

We expect the low liquidity and changing investment decision to keep the trend on this direction ahead of Santa Claus week as market players digest November consumer price index and happenings in fixed income market after the NGX index action pulled back  to trade above its 50-Day Moving Average on a low sell volume in the face of assets rebalancing and seasonality likely to influence stock prices ahead of year-end window dressing.

 The relatively low volume traded in the midst of retracement is creating new buy opportunities on the strength of the Q3 numbers. Also, candlestick formation and volume traded during the session revealed that institutional players are not buying yet.  It is equally noteworthy that during a ranging market many players seat on the fence waiting for a breakout or down before jumping into any position.  Even as many stocks are trading within their buy ranges, a situation expected to attract more funds into the stock market, given the Dividend Yield capable of serving as a hedge against inflation.

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Ambrose Omordion

CRO|Investdata Consulting Ltd



Tel: 08028164085, 08179547605